Providence has one of nation’s highest property tax burdens

Experts say Brown's large footprint is boon, not bane

Thursday, April 27, 2006

Commercial property taxes in Providence are the third highest in the nation, according to the Rhode Island Public Expenditure Council, raising concerns that economic growth in Providence will stagnate. While some community activists say Brown’s large property holdings drive up property taxes, some experts disagree.

The University is one of the largest landowners in the city and has tax-exempt status as an institution of higher learning, according to Richard Spies, executive vice president for planning and senior advisor to the president. In lieu of property taxes, Brown voluntarily pays a certain amount to the city each year – an amount determined in an agreement between the city and Brown, Providence College, Johnson and Wales University and the Rhode Island School of Design, the city’s four private higher education institutions.

That payment started at $1 million three years ago and has risen 1.5 percent each year since then. When the University buys property, it becomes tax-exempt, but the University continues to pay taxes on the land for five years. After that five-year period, Brown pays two-thirds the original amount for the next half decade, then one-third for the following five years. This agreement is an attempt to “give the city time to adjust,” Spies said.

Experts say the high commercial tax rates detailed in the RIPEC report are not an attempt by Providence to offset revenue lost to University-owned tax-exempt properties.

“It has nothing to do with Brown,” said Gary Sasse, director of RIPEC. While tax burdens are a “complex issue,” a change in Brown’s tax-exempt status “would not change the findings.”

Both Sasse and Charles Francis, chair of the Greater Providence Chamber of Commerce Board of Directors, said Providence universities are “economic engines for the city.”

Francis expressed concern over commercial property taxes in Providence but described Brown’s yearly payment to the city as sufficient to make up for its tax-exempt status.

“I don’t think it’s unwarranted for them to be not paying,” he said.

Ronald Dwight ’66, treasurer of the College Hill Neighborhood Association, disagreed.

“Brown continues, in its arrogant way, to think it’s the Roman Catholic Church,” he said. “They think they’re supplying so much of a benefit to the city.”

Since 60 percent of property in Providence is tax-exempt, according to Dwight, and the University is the largest landholder among tax-exempt organizations, “Brown is largely responsible” for the high property taxes, he said.

“The recent payment Brown paid is peanuts compared to Harvard or Yale,” he said, citing Harvard University’s recent $500 million reimbursement to the city of Cambridge, Mass., and Yale University’s agreement to pay $250 per student to New Haven, Conn., each year.

According to Dwight, only property used for “purely educational purposes” should be tax-exempt. He questioned the tax-exempt status of the Inn at Brown and student residence halls.

“When students live in my buildings, I have to pay taxes,” he said. He characterized the University as “a wealthy institution” with wealthy students. “It’s not a lot to ask a few percent more in taxes,” he said.

The issue of Brown’s tax-exempt status is “not a new problem,” Spies said. The University’s charter also stipulates Brown’s tax-exempt status, he said.

He said it is both “principled” and “practical” to continue the current system.

“This is a private institution serving a public purpose,” Spies said. States across the country tax privately owned enterprises with “private purposes” to have them contribute to society, he said. “Universities,” on the other hand, “contribute by what they do. We’re not taking from the federal government,” he said.

Spies also pointed to the “particular opportunity around universities for larger economic development,” citing “some of the most successful and improved cities” as capitalizing on a university’s presence to develop economically.

Spies pointed to Thayer Street as an area benefited by Brown’s presence.

“It would be hard to imagine a commercial district like that without the University,” he said.

Universities not only attract retail shops aimed at students but also “knowledge-oriented economic activity,” Spies said. “Silicon Valley is not where it is by accident, it’s there because Stanford (University) is there.”

But Dwight said “Brown highly over-exaggerates the benefit they have to the community,” citing “toxic waste” and “huge buildings under our noses” as “basically attacking the quality of life on the East Side.”

“Brown is going to do to Providence what Yale did to New Haven,” Dwight said. “Elites are not going to try to spend all this money (on property taxes) when the community is deteriorating.”

“Brown has been freeloading for a long time,” he added.

The RIPEC report also notes that residential property taxes in Providence fell from a ranking of 12th for a $300,000 home in 2004 to 24th in 2005.

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